In a bid to further strengthen their existing relationship, Norwegian oil giant Statoil ASA reportedly intends to help Brazilian state-controlled company Petrobras (PBR - Free Report) arrest deteriorating production at aging wells in the offshore Campos basin.
In August, the parties inked a memorandum of understanding, which has been developed further to target aging wells. Per the sources, the companies are holding discussions regarding the terms under which Statoil could take stakes in some fields in exchange of fresh investment and technological collaboration.
Statoil confirmed the plans through an emailed statement. However, it refused to disclose the detailed discussions and plans. Petrobras did not divulge any detail in this respect.
The decision emphasizes Petrobras’ plan to rationalize capital spending in order to weather the effect of low oil prices and an extensive corruption scandal concerning the company.
Notably, Statoil had agreed to pay $2.5 billion for a 66% stake in Carcara, one of Petrobras' largest oil and gas prospects, just two months ago. Recently, the companies also signed a deal to cooperate on existing fields in Brazil’s Campos and Santos basins.
The Campos basin, which accounted for 85% of Brazil’s oil output five years ago, now accounts for 58% of the nation’s production. Petrobras alone supplies about 80% of Brazil’s oil and is liable to develop huge offshore oil discoveries in a region known as the Subsalt Polygon.
An offshore region near the coast of Rio de Janeiro – the Subsalt Polygon – produced its first oil in 2008. In fact, some of the world's largest recent oil discoveries have been made in the region.
In Sep 2016, Petrobras reduced its planned investments for the period 2017–2021 by 25% to $130 billion in an attempt to lower the largest debt burden among global oil producers. These spending cuts affected the Campos basin the most. Per the business plan for 2017–2021, the estimated rate of decline of production in the Campos Basin has been lowered to 9% a year from the prior estimate between 12% and 15%.
The plan also comprised the need for production partnerships in the Campos basin, mainly to recover output in the basin's Marlim field.
Statoil currently carries a Zacks Rank #3 (Hold). Some better-ranked players from the energy sector include Chevron Corporation (CVX - Free Report) and Evolution Petroleum Corp. (EPM - Free Report) . All these stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Chevron posted a positive earnings surprise of 54.84% in the preceding quarter.
In the last reported quarter, Evolution Petroleum Corp. delivered a positive earnings surprise of 350.00%. Coming to the earnings surprise history, the company beat estimates in two of the last four quarters.
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